Eurozone inflation to hit lowest rate

Euro logo outside headquarters of ECB Frankfurt - Arab Today Annual inflation in the 17-nation eurozone fell sharply in September to hit its lowest rate since February 2010, according to a first estimate on Monday by the Eurostat data agency. Year-on-year inflation fell 1.1 percent in September after a 1.3 percent drop in August, largely due to a strong decrease in energy prices, which slid 0.9 percent after 0.3 percent in August. Eurozone inflation only a year ago stood at 2.6 percent. If confirmed, September's figure would be the lowest inflation rate in 43 months. Eurozone inflation had hit a 38-month low of 1.2 percent in April but then picked up as the economy recovered from a record 18-month recession. In September, prices of food, drink and tobacco products showed the biggest increase, rising 2.6 percent against 3.2 percent in August, followed by services at 1.5 percent against 1.4 percent. "With inflation likely to fall further below the ECB's target of 'below, but close to 2% inflation' in the coming months, the ECB has plenty of scope to loosen monetary policy further," said James Howatt of Capital Economics. "At the very least, further action to boost liquidity in the banking sector looks increasingly likely." ING bank economist Martin van Vliet said that "unless oil prices were to rise significantly, Eurozone headline inflation should remain well below 2% throughout the remainder of this year and next as food price inflation eases further and core inflation continues to be held down." "Against this backdrop, we would expect ECB-President Draghi to reaffirm on Wednesday the ECB?s commitment to keep interest rates at record lows for an 'extended period', while keeping the door to a further rate cut or a new LTRO wide open." Source: AFP